After months of stagnation, there is finally some good news for the trucking industry. Forecasters and analysts are predicting a slow but steady improvement in freight volumes and rates in the months to come. However, caution is still advised as the road ahead may be long and challenging.
DAT Freight and Analytics, the company behind the DAT One online freight marketplace and DAT iQ data analytics service, recently reported a positive trend in the gap between spot and contract rates. Typically, spot rates react more quickly to market pressures compared to contract rates, which are locked in for a specific time period. When the market is rapidly changing, the gap between spot and contract rates widens. As the market stabilizes, the gap becomes smaller.
In December 2023, spot load postings on the DAT Trendlines page decreased by 23.3% from the previous month and were down 57.2% compared to December 2022. However, van spot rates increased by 1.6% from the November average rates. On the other hand, both refrigerated and flatbed rates declined by 0.7% and were significantly lower than the rates from a year ago. As we enter the second half of January, both dry van and refrigerated rates have increased from December.
FTR Transportation Intelligence’s vice president of trucking, Avery Vice, stated in a recent web presentation that consumer spending remains strong, with record levels of growth in both services and goods. This, coupled with the current strong labor market, suggests that freight demand will improve in 2024. However, the elephant in the room is the surplus of truckload capacity. There are simply too many trucks for the available freight. While truck sales are falling behind compared to the same month last year, the number of for-hire revocations of authority is setting records as carriers leave the market.
FTR forecasts that trucking spot rates will gradually increase throughout 2024 as the market continues to contract. However, the potential challenge lies in the possibility of deflation. As interest rates rise to slow down inflation, consumer spending may decrease, resulting in a reduced need to restock inventories and fewer available shipments.
In a report released by ACT Research, senior analyst Tim Denoyer stated that the freight cycle is poised to enter a new stage in 2024. He also noted that global shipping is in turmoil due to two intermodal lane routing “pinch points” in the Panama and Suez canals. In Panama, the limited water supply for the locks, along with the recent widening of the canal, is causing delays in shipping. On the other side of the globe, the Suez Canal is being impacted by the turmoil in the Middle East, with attacks on ships by Houthi rebels in Yemen. As a result, shipping lines are rerouting ships to avoid these canals, potentially causing disruptions in the trucking market.
The Cass Freight Index for December showed a 2.1% increase in shipments, adjusted for seasonality, while the amount of spend for those shipments increased slightly. The report, written by Tim Denoyer, noted that the acceleration in real disposable incomes, supported by sharp disinflation, and a strong labor market, suggest that freight demand fundamentals will improve in 2024.
Motive, a company that measures visits to retailer’s warehouses using GPS information from fleets’ in-cab systems, predicted in their January report that the freight market will continue to be depressed in comparison to the previous 24-month cycle. However, they also see signs that the market may stabilize in the second half of the year. They also pointed out that the trucking market continued to contract in December due to a high number of carrier exits and a low number of new carrier registrations.
In conclusion, while there is some positive news for the trucking industry, truckers will have to continue to weather the storm for the time being. As capacity continues to shrink, rates are expected to increase gradually. The road ahead may still be challenging, but any improvement in rates and freight availability will be welcomed by truckers. As always, we salute and support our hard-working truckers who keep our economy moving.
